1. Fundamental Limitations of Networked Decision Systems Munther A. Dahleh Laboratory for Information and Decision Systems MIT AFOSR-MURI Kick-off meeting, Sept, 2009 TexPoint fonts used in EMF. Read the TexPoint manual before you delete this box.: AAA A

2. 2 Smart Grid

3. 3 Drug Prescription: Marketing The drugs your physician prescribes may well depend on the behavior of an opinion leader in his or her social network in addition to your doctor’s own knowledge of or familiarity with those products.

4. 4 Smoking Whether a person quits smoking is largely shaped by social pressures, and people tend to quit smoking in groups. If a spouse quits smoking, the other spouse is 67% less likely to smoke. If a friend quits, a person is 36% less likely to still light up. Siblings who quit made it 25% less likely that their brothers and sisters would still smoke.

5. 5 Social Networks and Politics Network structure of political blogs prior to 2004 presidential elections

6. 6 Networks: Connectivity/capacity EngineeredHuman/ Selfish Computation Learning Decisions Nature of Interaction: Cyclic/Sequential Outline

7. Learning Over Complex Networks In Collaboration: Daron Acemoglu Ilan Lobel Asuman Ozdaglar

8. 8 The Tipping Point: M. Gladwell The Tipping Point is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire. Just as a single sick person can start an epidemic of the flu, so too can a small but precisely targeted push cause fashion trend, the popularity of a new product, or a drop of crime rate.

9. 9 Objective Develop Models that can capture the impact of a social network on learning and decision making

10. 10 Who's Buying the Newest Phone and Why? This phone has great functionality. 1 Got it! I read positive reviews, and Lisa got it. 2 Got it! 3 4 Everyone has it, but 3G speeds are rather lacking. 5 Didn’t. It looks good, but Jane didn’t get it despite all her friends having it. 6 Didn’t. 7 Before I asked around, I thought the phone was perfect. But now I’m getting mixed opinions. Should I get it?

11. 11 Formulation: Two States This phone has great functionality. 1 Got it! I read positive reviews, and Lisa got it. 2 Got it! 3 4 Everyone has it, but 3G speeds are rather lacking. 5 Didn’t. It looks good, but Jane didn’t get it despite all her friends having it. 6 Didn’t. 7 Before I asked around, I thought the phone was perfect. But now I’m getting mixed opinions. Should I get it?

12. 12 General Setup Two possible states of the world both equally likely. A sequence of agents making binary decisions Agent n obtains utility 1 if and utility 0 otherwise. Each agent has an iid private signal. The signal is sampled from a cumulative density. The neighborhood: The neighborhoods is generated according to arbitrary independent distributions. Information:

13. 13 The World According to Agent 7

14. 14 Rationality Rational Choice: Given information set agent chooses Strategy profile: Asymptotic Learning: Under what conditions does

15. 15 Equilibrium Decision Rule The belief about the state decomposes into two parts  Private Belief,  Social belief, Strategy profile is a perfect Bayesian equilibrium if and only if:

16. 16 Selfish vs. Engineered Response: Star Topology (Cover) Hypothesis testing: If nodes communicate their observations: What if nodes communicate only their decisions:

17. 17 Selfishness and Herding Phenomenon: [Banerjee (92), BHW 92] Setup:  Full network:  with probability 0.8 Absence of Collective Wisdom

18. 18 Private Beliefs Definition: The private beliefs are called unbounded if If the private beliefs are unbounded, then there exist some agents with beliefs arbitrarily close to 0 and other agents with beliefs arbitrarily close to 1. Discrete example: with probability 0.8?

19. 19 Expanding Observations Definition: A network topology is said to have expanding observations if for all, and all, there exists some such that for all Conversely Absence of Excessively Influential Agents

20. 20 Doyle, Francis Tannenbaum Vidyasagar Astrom/Murray Ljung Kailath New Book No “learning”! Influential References

21. 21 Summary If then learning is impossible for signals with bounded beliefs  Line network It is possible to learn with expanding observations and bounded beliefs

22. 22 Deterministic Networks: Examples Full topology: Line topology:

23. 23 Examples: A Random Sample Suppose each agent observes a sample of randomly drawn (uniformly) decisions from the past. If the private beliefs are unbounded, then asymptotic learning occurs.

24. 24 Examples: Binomial Sample (Erdős–Rényi) Suppose all links in the network are independent, and for two constants and we have  If the beliefs are unbounded and, asymptotic learning occurs  If, asymptotic learning does not occur

25. 25 Active Research Just scratching the surface…. Presented a simple model of information aggregation  Private signal  Network topology More complex models for sequential decision making  Dependent neighbors  Heterogeneous preferences  Multi-class agents  Cyclic decisions Rationality Topology measures: depth, diameter, conductance  Expanding observations  Learning Rate Robustness